Bunna Insurance’s net profits have climbed to one million Br of positive profits, as the firm recoverd from its 10 million Br loss a year earlier. Bunna reported the profit after operating in losses for the past three years, which resulted in accumulated loss of 12.72 million Br.
Experts say the four year-old Firm is in better shape as it is heading in the right direction.
“Bunna needs to work more to turn the accumulated loss into a positive figure,” says Abdulmenan Mohammed Hamza, an analyst at London Portobello Ltd.
The Firm’s management relates the loss accumulation to expansion in businesses.
“We spent massive amounts of money on branch expansion in the first two years of operations,” said Endalkachew Tesfay, marketing executive of Bunna.
In its three years of operation, the firm has opened 13 outlets; three percent of the industry. The massive improvement in Bunna’s profit was the result of increased underwriting surplus and a surge in interest income. Underwriting surplus, the amount that remains after paying claims and expenses, has gone up to almost four million Birr from a deficit of 5.65 million Br in the prior year.
The reported positive results have set the company on a positive platform, even compared with nearest competitors.
One of the firm’s peers, Ethio Life & General Insurance, posted 800,000 Br losses in general insurance. Ethio Life, however, compensated for the loss with a profit of over nine million Br from life insurance and investments.
Bunna’s remarkable performance was also seen in its interest income earned from savings in banks. Its interest income increased by three-fold to 7.5 million Br. The premiums that Bunna ceded to reinsurers, meanwhile, reached 25 million Br. As a result, Bunna’s retention rate declined to 77pc from 80pc.
“A reduction in retention rate is usual as the premiums are soaring,” said Endalkachew, the senior executive.
Last year, gross written premiums increased by 107pc to 105.94 million Br, which is 1.6pc of the industry and 13th highest among all insurers in the country.
Bunna earned a little over 7.26 million Br in commissions from reinsurers, an increase of 194pc. The bulge in income also resulted in more expenses.The firm paid commissions of 6.7 million Br to its agents, an increase of 130pc.
Direct operating expenses such as salaries and benefits, and general administration expenses increased by 90pc to over nine million Birr.
“Bunna’s operating expenses will increase as it is on a course of expanding its business,” said Abdulmenan, the banking expert.
In an effort to raise its market penetration, during the past year, the firm collected 446 investors’ data and distributed it to branches.
“We have spent considerable amounts of money to expand branches and human resources capacity as well,” Endalkachew said.
About 27 new employees were hired in the past year alone, which raised the human resources of the company to over 100.
Bunna has also managed to surpass the 75 million Br minimum paid up capital requirement set by the central bank of the country three years ago, which states that 60 million Br is required to provide life insurance and additional 15 million Br is also necessary to establish a life and general insurance company.
“This year, we plan to increase our paid up capital to 100 million Br,” Endalkachew said.
Leave a Reply